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Policy Relevant Heterogeneity in the Value of Statistical Life: New Evidence from Panel Data Quantile RegressionsThomas J. KniesnerSyracuse University - Department of Economics; Institute for the Study of Labor (IZA) W. Kip ViscusiVanderbilt University - Law School; National Bureau of Economic Research (NBER); Vanderbilt University - Department of Economics; Vanderbilt University - Owen Graduate School of Management; Vanderbilt University - Strategy and Business Economics James P. ZiliakUniversity of Kentucky - Department of Economics October 15, 2009 Journal of Risk and Uncertainty, Vol. 40, No. 1, 2010 Vanderbilt Law and Economics Research Paper No. 09-28 Abstract: We examine differences in the value of statistical life (VSL) across potential wage levels in panel data using quantile regressions with intercept heterogeneity. Latent heterogeneity is econometrically important and affects the estimated VSL. Our findings indicate that a reasonable average cost per expected life saved cut-off for health and safety regulations is $7 million to $8 million per life saved, but the VSL varies considerably across the labor force. Our results reconcile the previous discrepancies between hedonic VSL estimates and the values implied by theories linked to the coefficient of relative risk aversion. Because the VSL varies elastically with income, regulatory agencies should regularly update the VSL used in benefit assessments, increasing the VSL proportionally with changes in income over time.
Number of Pages in PDF File: 32 Keywords: value of statistical life, VSL, quantile regression, panel data, fixed effects, PSID, fatality risk, CFOI JEL Classification: C23, I10, J17, J28, K00 Accepted Paper SeriesDate posted: October 19, 2009Suggested CitationContact Information
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